The Japanese economy just can’t find traction right now, despite the best efforts of policymakers.
And they’re trying, as shown in this excellent chart from Westpac. It shows Japan’s monetary base — simply the sum of currency in circulation and reserve balances held at the Bank of Japan — going back to 2003.
You may notice the sharp change in direction in early 2013, coinciding with the decision from the BOJ to adopt its so-called Quantitative and Qualitative Easing (QQE) program in April of that year, complementing newly-elected Japanese prime minister Shinzo Abe’s economic platform, known as “Abenomics”.
The size of the Japan’s monetary base has ballooned ever since, even accelerating in recent years following an increase in the QQE purchase rate in October 2014.
“(Since October 2014) the Bank of Japan QE program has been running at an JPY80 trillion annual increase in the monetary base,” wrote Sean Callow, senior currency strategist at Westpac, in a research note released on Wednesday. “This equates to $US65 billion (using USD/JPY 103) per month, a very rapid pace by any standard.”
In current prices, it currently stands at 403.38 trillion yen, or around $US3.9 trillion.
As rapid as it may be, the rate of growth, hence the size of the monetary base, may accelerate even further should market expectations for further monetary stimulus from the BOJ be proven right.
The only question now is when will it lead to an increase in inflationary pressures, and indeed a boost to economic growth? For all the asset purchases that have been made already, the economic outcomes have been hardly stellar.
The phrase “pushing on a piece of string” comes to mind.
The Bank of Japan next meets on September 20-21.